Coal faces writing on the wall

Energy

The threatened extinction of Britain’s coal industry rose to the top of the political agenda when RJB Mining, the country’s largest producer, said its new contracts with electricity generators would not prevent the closure of up to eight pits and the loss of 5,000 jobs.

Energy minister John Battle instituted a review of the market for coal by the electricity regulator Offer. Professor Stephen Littlechild, director-general of Offer, is expected to issue a consultation paper in January and make recommendations to the minister by the summer.

The steps under consideration are likely to include a moratorium on construction of further gas-fired plants and a review of the long-term power purchase agreements of up to 15 years between the independent gas-fired generators and the regional electricity companies.

And, in a surprise move, a December statement by Tony Blair promised a deal between RJB Mining and the generators which would stave off closures for six months.

However, the scope for action in either case seems limited. The total gas-fired plant either operating, under construction or with irreversible consent will provide 22GW of installed capacity by 2000 40% of peak demand. The suspension of the 8GW awaiting consent seems unlikely to make an opening for coal.

Even if the review finds some of the agreements between independent gas-fired generators and the RECs are uneconomic, is is impossible for the long-term contracts to be declared void.

The Government will find it difficult to square any strategy for increasing coal’s market with its commitment to a 20% cut in greenhouse gas emissions by 2010. Coal plant, even using clean technology, produces substantially more carbon dioxide per installed megawatt than a combined-cycle gas turbine.

Another issue facing electricity and gas industries is the opening up of the domestic markets to competition.

There is concern at the impact competitive domestic markets may have on large industrial consumers. Eddie Proffitt, chairman of the Major Energy Users’ Council, says some suppliers seem to be diverting attention to the domestic front at the expense of large purchasers.

Andrew Cavenagh